Island Life by David Slack

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Island Life: Vendor says sell!

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  • Mark Easterbrook,

    If the banks take your advice, will they be cutting us some Slack?

    And will they take it before I agree to give them $16,500 in breaking fees later today?

    Nah didn't think so...ah well, it's a long game, innit?

    Auckland • Since Nov 2006 • 262 posts Report Reply

  • Blake Monkley,

    It appears timing is as important as location as an imperative component to succeeding in the cut-and-thrust world of owning property.

    Auckland • Since Jul 2008 • 215 posts Report Reply

  • James Littlewood*,

    If it wasn't Bill English, two years ago, berating the L gvt for creating an unfair, tax-payer funded competitor in the banking market place, who was it?

    And now he wants to throw away more tax dollars so that it's own customers like Mark here can give it less money.

    I mean, really, what gives any vendor the right to actually charge any actual fee for their goods or service. Who do the banks think they are, presuming to actually collect the fee they charge. That's what get's me. This whole price-of-stuff thing. Surely, as the customer, I set the price. No?

    Auckland • Since Mar 2008 • 410 posts Report Reply

  • James Littlewood*,

    I mean, if I bought a house right now, I'd set the price, right?

    Auckland • Since Mar 2008 • 410 posts Report Reply

  • FletcherB,

    I'm feeling pretty pleased with my own reading of the entrails...

    My 2-year fixed is up for expiry in two months... It rose about 1.5 % since I fixed in at 8.5%, and I was starting to think I didnt fix for long enough then all of a sudden- slow turnaround becomes crash! and I'm looking like a genius.

    And if that sounds like gloating..... I'll just balance that by admitting to being floating for the last ten years or so and always paying too much when in hindsight I would have been way better off sequentially fixing...

    more fool me...

    West Auckland • Since Nov 2006 • 887 posts Report Reply

  • Mark Easterbrook,

    I bear no ill will towards the bank - I know they have costs to recoup, and what I save on what's left of my term outweighs what it's costing.

    It's just kind of nice to see them freaking out a bit.

    Auckland • Since Nov 2006 • 262 posts Report Reply

  • James Green,

    I confess to being a little bemused by this one. My sense is that that people locking for a really long time locked for a long time last time. I was talking to one of my colleagues around a year ago who locked for 5 years, being all smug coming off their last 5 year fixed rate. There was also a reasonably substantial discount (over 1% to fix for longer rather than shorter). I dread to think what the break fees on that would be.
    I'm somewhat smug in that I took a higher short term rate for one of my mortgages which will roll off in May. The other comes off in early March.

    Dunedin • Since Nov 2006 • 703 posts Report Reply

  • James Green,

    I'm feeling pretty pleased with my own reading of the entrails...

    Heh. Actually, I can slightly discount my smugness because I originally picked the top would be earlier, which is why I was having to refix last May.

    Dunedin • Since Nov 2006 • 703 posts Report Reply

  • Mellopuffy,

    I think the only thing that rips my knickers about all this is the comments I keep hearing that that it's great for if you're wanting to buy in the housing market at present etc...__but__few commentators make the obvious point that very few banks if any won't loan anything more than 80% of a home's value.

    We are wanting to trade up to a larger home as our family is expanding but with the real estate agent's fees, possible break fee and the dropping market, we wouldn't have enough for a deposit on a bigger house, despite having chopped a decent chunk off our mortgage in the past 3 years.

    Anyone keen for a house swap?

    Dunedin, NZ • Since Feb 2007 • 63 posts Report Reply

  • Rich of Observationz,

    David is right.

    You wouldn't usually expect to be able to break a fixed rate and remortage to save money. If you could, they would advertise it as having a put option and it would be more expensive to pay for this. (Not to mention that everyone who knows how to calculate just how much more expensive it would need to be has been condemned as an evil banker and made redundant).

    But of course, the number one priority for this government is to help the affluent avoid having to sell the bach, SUV or rental property.

    My favourite estate agent wankline:
    <i>Buyer moving out</i>

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Paul Campbell,

    damn - I paid mine off this year - I could be getting a lower rate!

    Dunedin • Since Nov 2006 • 2608 posts Report Reply

  • Hayden Wilson,

    This whole break fee issue has me a bit puzzled. Would people be sympathetic to the banks trying to dump the fixed rates if rates had gone up?

    In the end, we signed up for the rates and the break fees. We made a bet and some of us will have lost it.

    Still and all, given that the interest charged on a 25 year mortgage makes the break fee look puny - I'd intrigued to know what the banks are saying to people who say "I know I signed up for this break fee, I know you are entitled to charge the break fee, but if you do then my business and all of that interest is going elsewhere."

    Since Nov 2006 • 27 posts Report Reply

  • Rich of Observationz,

    Also, I read in the DomPost today that banks won't lend to single people without a big deposit. Is this legal - marital status is a prohibited ground of discrimination, isn't it?

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Mark Easterbrook,

    Hayden, I think between low/no equity mortgages and rising prices, the last few years have been kind to people able to be in the property market.

    Suddenly, they don't get to have their (okay, our) cake and eat it too, so they squeal and pout for a bit.

    And ask Mr English for a pony, to make it better.

    Auckland • Since Nov 2006 • 262 posts Report Reply

  • Rich of Observationz,

    but if you do then my business and all of that interest is going elsewhere

    But how do they know you won't go elsewhere anyway at some point in the next 25 years. You want loyalty, get a dog. (and other aphorisms).

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Lyndon Hood,

    Anyone keen for a house swap?

    No, but apparently if you can arrange to settle selling your house and buying a new one one the same day it may be possible to transfer your current mortgage - if that would suffice.

    Won't help with the interest, but.

    As a person almost certainly buying their first house very soon, I'm a bit lightheaded, myself.

    Wellington • Since Nov 2006 • 1115 posts Report Reply

  • Josh Addison,

    I'd intrigued to know what the banks are saying to people who say "I know I signed up for this break fee, I know you are entitled to charge the break fee, but if you do then my business and all of that interest is going elsewhere."

    Yeah, that's Plan B - my first attempt to feel things out resulted in a call to the bank that basically went:

    "Hi, look, I've got a fixed mortgage with you, is there anything I can do to take advantage of these stupidly low rates? Like, anything?"

    "Well, your break fee is [ridiculously huge sum of money], so, um.. yeah..."

    He literally just trailled off at that point, leaving me to ask "so nothing, then?" I had kind of expected that - I acknowledge that it is unreasonable to expect a bank to go back on a contract in a way that disadvantages itself - but the fact that the guy wouldn't explicitly say to me that I had no options makes me think that perhaps I do...

    (My personal situation: partner and I bought our first home just under two years ago, when rates were starting to shoot up. Obviously, fixed was the way to go at that time. We fixed for 5 years on the advice of various people, who said that as first timers, we'd want to fix for a good while to begin with so that we could budget and there wouldn't be any surprises. As a whole bunch of people will doubtless be saying at the moment: if I knew then what I know now...)

    Onehunga, Auckland • Since Nov 2006 • 298 posts Report Reply

  • B Jones,

    I'm on the losing side of that particular wager, with another 18 months to go, but that's the way the cookie crumbles. Likewise I couldn't muster vast amounts of sympathy for the people who thought they could get a 9% return by putting all their assets in one finance company and expect it to be as safe as if they'd had it in the bank at 6%.

    That being said, perhaps this is my own fault, but although I was aware that there were break costs if you wanted to get out of a fixed rate, and that they could theoretically be higher than what you'd save in interest, exactly how that works isn't very transparent. I called the bank a few months back and was told that it would cost $8k to break my fixed term, and since I thought then it would only save $5k I didn't bother. I suspect that it would cost considerably more now.

    You pay your money and you takes your chances, but I think the banks need to be a whole lot more explicit about what those chances are. Finance companies don't know what their chances of going belly-up are, but banks sure as hell know what they're going to sting you for if you want to move on. It's only fair that they tell you that up front.

    Wellington • Since Nov 2006 • 976 posts Report Reply

  • Lyndon Hood,

    (I think) There was a chap on Campbell live the other week who insisted they hadn't explained about the break free. Apparently the bank didn't want to litigate it so long after the fact and there was some kind of deal.

    Wellington • Since Nov 2006 • 1115 posts Report Reply

  • Kyle Matthews,

    damn - I paid mine off this year - I could be getting a lower rate!

    If it makes you feel better Paul, I'll let you help pay mine - out of the goodness of my heart of course.

    As a whole bunch of people will doubtless be saying at the moment: if I knew then what I know now...

    I fixed three years two months ago, but the rate was from three years six months ago (long settlement). For five years.

    I figure even if it stays low and I spent the next 22 months paying significantly more than I would have on floating, I'm probably about even with the 38 months before that. And I wanted the security and certainty of knowing how much I'd be paying each fortnight.

    So: evenses really.

    Since Nov 2006 • 6243 posts Report Reply

  • Bart Janssen,

    but if you do then my business and all of that interest is going elsewhere.

    This of course is your only power in the relationship. But it is a very strong position at the moment.

    This depression was finally triggered by terrible banking and lending practices in the US banking industry. It's true that there were other stresses on the world economy that make the depression more wide reaching. But the trigger point was the failure of banks (financial institutions) to lend the money of the clients to borrowers who could and would pay the money back.

    We've heard many pundits say our banks are not at risk. Maybe that's true. But notice banks have become very cautious about lending. By crikey you actually have to have some money of your own before they'll lend you some! That wasn't true 2 years ago when those fixed mortgages were set.

    Notice also that developers and subdividers have all gone bye bye. No new buildings, no new mortgages for banks. Worse some of those developers got their timing all wrong and don't have any money to pay the banks the loans they took out. My bet is some of those developers are figuring out how they can leave NZ without paying the bank back, because some developers are like that.

    Two years ago everyone the bank lent to, had a job. Over the next year that will change. No job, no mortgage payments. And before you think the bank will just get it's money from a mortgagee sale, think again, that house won't sell for anything like what was borrowed. It isn't just the family that will lose in that situation, the bank will lose money too.

    Oh and those stories about leaky homes being bulldozed, most of the money in those homes came from the banks and the poor folk who have lost the home just don't have any money to pay the bank back.

    All that combines to make me think that our banks have some serious shit on their hands and frankly my bet is one or more of them will disappear in the next year or two. Or at least "merge".

    So YES your business is important. Especially if you are employed in a good job and can be a reliable source of income for them. DO ask to see the manager and discuss your options with her or him and don't rush the decision. They might say no today but in a month they might decide your business really is more important than a one breaking fee.

    Auckland • Since Nov 2006 • 4451 posts Report Reply

  • FletcherB,

    Also, I read in the DomPost today that banks won't lend to single people without a big deposit. Is this legal - marital status is a prohibited ground of discrimination, isn't it?

    If they really are using it to discriminate... then yeah thats bad and probably illegal (IANAL).

    But I would expect, with similar saving history (ie. deposit built up over time rather than majically appearing out of nowhere- demonstrating ability to budget and make regular payments), that a single person with a $100k salary would probably find themselves with the same ability to borrow as a $50k + $50k couple would be.

    What I mean is, I think ability to pay is probably far more importatnt to the bank than whether you are single, couple, whatever...

    I bought my first house, while single, with a deposit that was a) 25% of total price, and b) more than my annual salary.... because I'd saved it over time..... way back in 1995. It was hard, but it's really payed off in the long term.....

    Unfortunately, wage growth hasnt kept up, and I know it would be even more difficult starting out today... but I dont think it's impossible.

    West Auckland • Since Nov 2006 • 887 posts Report Reply

  • slarty,

    Maybe I'm a bit sad...

    My mortgage is split into 4 - 3 fixed, one floating.

    A fixed one comes up about every 18 months (I vary term based on my wild guesstimates in the market). I've got 2 rolling over in the next year.

    How hard is that? My average weighted cost of borrowing for the last few years has been 7.2% - as compares to over 9% had it been floating.

    It always surprises me how few people consider doing it this way.

    The new consumer credit act makes it a requirement that early repayment fees have to be within cooee [sorry for the jargon] of what it actually costs in terms of margin loss, I think that's what the ComCom are probably looking at.

    For example, looking at the margin difference on, say, $100k loan.

    [over simplified to make the point]
    Floating rate today: 5.5%
    Fixed rate on a 2 year, fixed last year: 8.5% (? trying to make the maths easy)
    Difference: 3% (say)

    = Bank margin loss $3k (I know this is technically wrong but focus on the principle not the maths)

    So a fee of $10k is unreasonable. If they said $4k they'd probably get away with it.

    I think that's what people are upset about...

    Since Nov 2006 • 290 posts Report Reply

  • linger,

    I couldn't muster vast amounts of sympathy for the people who thought they could get a 9% return by putting all their assets in one finance company and expect it to be as safe as if they'd had it in the bank at 6%.

    That's a little unfair.

    Remember, two years ago the banks were returning 8% or more on investments; by comparison with that, 9% from an investment company wasn't high enough to set off any warnings.

    In quite a few cases, people made investments in seemingly stable companies, only to see those companies drastically change their business model, without warning, in the following year. (Provincial's foray into the Auckland car finance market, for example. Original investors in Bridgecorp would similarly have been justifiably feeling cheated when its directors spun off its best-performing [though that's only a relative term here] assets as a separate company -- a classic bait-and-switch. And as for the sheer stupidity that saw Capital & Merchant void the terms of the insurance contract which was their main guarantee of investor protection...!)

    Also, many investors attempted to spread the risk a little ... by investing in several finance companies -- a strategy that unfortunately ignored the fact that they're all in the same market.

    But as has now become obvious, the investment company returns did not reflect the real level of risk. Hindsight is a wonderful thing, innit. (And thus I continue to work in Japan...)

    Tokyo • Since Apr 2007 • 1889 posts Report Reply

  • Craig Ranapia,

    But of course, the number one priority for this government is to help the affluent avoid having to sell the bach, SUV or rental property.

    Balls, Rich. More like middle-class twats who vote took on debt they couldn't realistically service to buy grossly over-valued property, and I don't think anyone would find it politic to say "well, sometime you roll the dice and get snake eyes, suck it up."

    And if I wanted to get snarky, I could say the Opposition's number one priority is not that different.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

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